Charging per click:

TV in the '50s, the 'Net in the 90s;three examples of real-world
clicking and why per click will work with The Clickshare
System

By Bill DensmoreClickshare Corp.

The WWW is where television was in its infancy where there was no
way to make a subscriber association between a television viewer and the
programming source. And therefore it was thought that the only way to
fund television programming was with advertising. That worked really well
throughout the '60s and even into the '70s, until a little idea born as a
technology solution to a technological problem -- cable -- forced a new
paradigm on television.

Cable got its start in little towns in America, far out from
metropolitan areas, where viewers wanted to be able to receive a better
television signal and were willing to pay for it. As cable began to wire
the big cities, and satellite technology advanced, smart programmers
realized they could charge cable operators for programming and that if
the programming was compelling enough, the operators could charge their
subscribers for a premium channel.

That was the start of the market segmentation of television.
Broadcast television remains very profitable, but it is now strictly a
mass-market medium. And broadcast television will suffer in the era of
disaggregated content that we are entering as "fat pipes" allow point to
point communication. Television started as a sponsored model and has
evolved to a hybrid model that is both sponsored and subscription.

Examing the growth of television, voice telephony and grocery
purchase offers insights into the likely success of Rper-itemS purchase
as the Internet matures. It shows how technology appears inevitably to
result in greater consumer choice through product disaggregation.

VIDEO TAPE RENTALS: TV PER CLICK
Now it is also possible to buy programming on a pay per view,
"per click" basis both from your cable company, if it has a programmable
system, and by going to the neighbor videocassette store and renting a
movie. Now who would have predicted in the '60s that somebody would pay
$2.50 to rent a movie for one night when they could get it seemingly for
free on television? The answer is that what you pay $2.50 to view at a
video store, because of the economics of the marketplace, is now
typically more recent or higher quality entertainment than what you can
view on advertising sponsored broadcast television. And the viewing of it
can be personalized to your schedule. And that's why people are willing
to pay for it whether it is delivered digitally by your cable company
direct to your home or whether you have to physically pickup a cassette tape.

LONG DISTANCE: WHATUS YOUR NUMBER?
In the telephone industry, much earlier, it was a universal billing
settlement system which allowed us to make a call from a phone connected
to AT&T to another phone connected to MCI or Sprint and have the
connection go through in a few milliseconds. Most of us are old enough to
remember when making a long distance call even 15 miles or so would
involve an intercept operator coming on the line and saying, "Your number
please?" The technology was too primitive to allow the background
transfer of your number for billing purposes. Now we even have universal
Caller ID, for better or worse. Look at how casually we now pick up the
phone and make a long distance call for which we are billed "by the bite"
or "by the touch." All the charging is buy the minute in background, even
though you as the consumer may pay for it with a variety of calling
plans, some of them involving a flat monthly payment.

FOOD PURCHASE: IT'S YOUR BAG, TAKE IT OR LEAVE IT
When you go to the supermarket, you don't purchase your groceries by
subscription because you don't have to. Modern food distribution has made
it possible for you to pick items one at a time and pay for them
individually. In the 18th century, you bought in bulk and pretty much the
same thing the farm family down the road bought if you didn't grow it
yourself. Imagine if you went into a grocery store and went to a counter
where a clerk said: RHere is your bag of groceries, it has the same
contents as every other bag and the cost is $20, take it or leave it.S
That is the choice consumers must make today with physical publishing.
They can take The New York Times or leave it; they have no option to
modify it. It is axiomatic that once the technology makes "a la carte"
purchasing easy and cheap, some segment of the consuming public will
demand it. Some others will still perhaps prefer to buy in bulk.

THE HOURGLASS AND THE CYLINDER
This sort of paradigm shift can be expressed with a chart that we call
the hourglass vs. the cylinder.

In the 20th Century, information has moved as if through an
hourglass. No matter how many information providers or users, there was
always a technological pinch point that forced for economic reasons an
editing process -- the speed of a modem, cost of adding pages, or limited
hours in the broadcast day. And a natural force -- call it "gravity" --
made it difficult for the consumer to send information back up the
hourglass to the information provider.

In the next century, information will move about as if in a
cylinder. Now bandwidth -- the "fat pipe" -- is no longer the most
significant constraint. The real constraint is peoples' ability to digest
the huge volume of information coming down the pipe. So users have to
join more than ever with editors in deciding which information they will
receive.

Actually, the cylinder should be displayed on its side. Because
there is no longer any reason to depict the information provider as
"higher" than the information consumer. In fact it won't be at all clear
much of the time who is the consumer and who is the provider, since those
roles can reverse as easily as they do during a present-day voice
telephone conversation.

THREE BUSINESS MODELS EVENTUALLY POSSIBLE
y
If you look around, you can see the everything free, subscription
only and pay-per-click business models already operating in
electronic-information delivery.

The free model is what's most evident on the WWW right now. With
vast free information from -- by Steve Outings' latest count -- 800 or
more newspapers up in the last year, only now are some papers gathering
the resolve to figure out how to start charging for it.

The consumer online services have for years built a user base --
although in two out of three cases arguably with no operating profits --
charging a subscription and delivering "all-you-can-eat" service up to
some hourly minimum. Of AOL, Prodigy and Compuserve the one which has
shown undeniable profits was the one which had a hybrid subscription and
per- item charging model -- Compuserve.

The third model, also a hybrid, is skewered toward
"charge-per-click" and has been very successful for the proprietary,
business-information data aggregators such as Dialog-Knight Ridder
Information Services, DataTimes, Dow Jones News Retrieval, West
Publishing, Lexis-Nexis, Information Access Co. and a half-dozen or so
others. So there is plenty of evidence that consumers will pay for things
"by the click" if they want them badly enough.

WILL SURFERS PAY BY THE CLICK?
The perception is that consumers won't pay by the click on the Internet
and the reason for that perception is that so much of the information on
the Internet is largely undifferentiated. You can find wire-service
reports at dozens of sites; you can find national news at maybe hundreds
of sites; you can find government information all over the place. But
what you won't find is some of the specialized information that's been
sold routinely for years by the proprietary aggregators. And the reason
you won't find it is there has been no adequate business model for
charging for it.

That's changing. As of perhaps six to eight months ago, pioneered
by such enterprises as First Virtual Holdings Inc., Netscape
Communications Corp., Open Market Inc. and a handful of other vendors,
you can now establish a web site where you can readily subscribe your
users and at the very least charge them a flat-monthly rate and vend them
information, keeping track of what the user views and when. Increasingly
in the more sophisticated web-site management programs you can aggregate
a-la-carte, per-click charges to individual pieces of information and
charge those periodically to a credit card or other credit facility.

So the WWW business model has been advanced to the stage of what
the traditional telephone market would look like if each of the Baby
Bells and independent telcos had their own billing systems that didn't
interoperate with each other. You can imagine how you would feel about
that if you had your service from the State Long Distance Telephone Co.
in Elkhorn, Wis., and couldn't call 40 miles to Milwaukee without opening
up a second account with Wisconsin Bell. But that's where things stand
today on the Internet. What's needed is a one- bill, one password system
that works across multiple, independent Internet publishers that allows
those publishers to share users and information easily and profitably.

THE CLICKSHARE ACCESS AND PAYMENT SYSTEM
WeUve tried to lay out in a general way the technological and
business challenges of the World Wide Web as we enter the next century.
Clickshare Corp. has funded development of the Clickshare Access and
Payment System because we think what's needed is a distributed
user-management system which authenticates users and enables
subscriptions or micropayments down to 10 cents across multiple Internet
servers.

Think of Publisher A as an Atlanta newspaper and Publisher B as a
Boston newspaper. And imagine for a moment that both of these papers have
web sites and that in each case they enroll users for $5 a month and
allow their own users "all-you-can-eat" access to basic news resources
for that price. Now lets suppose a baseball fanatic in Atlanta wants to
read a Red Sox pregame workup and finds a link to the Boston newspaper's
story at the Atlanta web site. Click . . . the reader goes to the Boston
site. But here the Boston server, in the present world, says "Sorry,
access prohibited -- please subscribe." The user, faced with paying $5
for one article and starting a second ongoing $5-a-month relationship
just skips the article and the Boston paper loses a "single-copy" sale.

Now consider if both newspapers were running Clickshare Web
Server Software and were Clickshare Publishing Members. Repeat the
scenario. Now the Atlanta readers request goes out with a digital calling
card. And that card, read by the Boston server, says, "This user is a
Clickshare-enabled user and has an account at the Atlanta Clickshare
member." The Boston paper sells the article for, say, 10 cents at
wholesale.
The reader gets his article with no additional password or challenge. At
settlement time, Clickshare Corp. applies a 10 cent charge to the Atlanta
newspaper's clearing account and pays the Boston newspaper 8 cents,
keeping 2 cents as a transaction fee. The Atlanta newspaper to charge its
user whatever it wishes. It could pass along the 10 cents, apply a 20%
retail markup to 12 cents, or bundle the Boston story as part of a
premium subscription package. Clickshare does not set pricing at the user
level because it doesn't own the user -- the home-base publisher does.

We think our system, up and running with two trial publishers,
provides three essential requisites for jump- starting Internet
information commerce:

The first is to make sure that advertisers can make
apples-to-apples comparisons about identifiable users and what they are
looking at across all participating web sites, much as the Audit Bureau
of Circulations serves as an independent authority for verifying
newspaper circulation. By authenticating and indentifying individual
users, rather than machine addresses, Clickshare also make possible
classes of services for admitting or qualifying user access to free sites
or corporate "intranets."

The second reason is to put in place a protocol which can move
across the Internet information preferences and voluntarily-submitted
demographic attributes of a user. This is essential information if the
Internet's promise as a medium for personalization of information
delivery is going to be realized.

And the third reason is so that users can have the convenience of one
bill and one universal ID and a "digital calling card" that with
Clickshare will automatically accompany their information requests across
the World Wide Web. Each time they request information from a new site,
that site knows who they are, exactly where they came from, that they
have good credit, and that the new site will be assured of getting paid
after it vends the requested information or software.

This, by the way, does not mean that the site that's selling
information has to know the name or any private demographic information
about that user. It only needs an anonymous ID number of the purchasing
user. And that's the way our Clickshare service is set up -- to respect
user privacy and store the user's name only at the user's home-base
publisher, not with any central database which we control.